Condo insurance: background
Condo insurance is quite similar to house insurance, but there are a few differences that you must know – especially if you are a landlord and rent out your condominium unit.
InsurEye, an online platform that helps Canadians secure car, home and critical illness insurance, shared some tips with TheRedPin about landlord condo insurance.
There are three insurance policies involved in condo insurance:
- A commercial condo insurance policy owned by a condominium corporation that manages the property
- Your landlord condo insurance policy owned by you as a condo unit owner
- Your tenant’s condo insurance policy (also called renters insurance) purchased by your tenant
This complexity is dictated by the fact there are multiple condo units within one building; some of them are rental properties and others are occupied by unit owners.
Each of the policies mentioned above have their own purpose and cover specific risks. You need to know their distinctions when getting a condo insurance quote.
What does landlord condo insurance cover?
The condominium corporation’s insurance covers the building envelope and common areas, while tenant’s insurance, if you are a landlord, covers the tenant’s personal belongings.
Landlord condo insurance covers the following main items:
- Condo upgrades such as engineered hardwood floors that you’ve added after moving in, and improvements (e.g. upgraded lighting and appliances) and fixtures.
- Contents provided for use by the tenant – Appliances and furniture that were included in the contract and any additional devices you have installed for your tenants, like a built-in sound system or air conditioning.
- Premises liability – Protects you financially if somebody is accidentally injured while visiting your property.
- Loss of use – Any optional rental income that you’d lose because of an insurance accident, such as a fire or flooding from the unit above yours.
- Total loss – Loss of your contents, upgrades, improvement and/or fixtures due to an event like a fire. However, in this case the condominium corporation’s insurance would also come into play to cover the building envelope and common areas.
- Burglary – Theft of landlord-owned contents from the condo unit (e.g. appliances, upgrades).
- Burglary – Theft of landlord-owned content from the storage locker.
What does landlord condo insurance not cover?
Landlord contents insurance does not cover risks that are covered by the condominium corporation’s policy, or by the tenant’s insurance policy (the details of which are listed out below).
Commercial condo insurance covers:
- Condo building: The structure for the entire building design according to the construction plans.
- Common areas: These are all areas that are used by all the condo unit owners and tenants, such as the lobby, hallways, elevators, recreational areas, mail room, etc.
- External elements of the condominium building: Leaking or damaged roof, damaged or broken windows, etc. External damage to the balconies is covered by the commercial condo insurance policy, but the damages to your contents inside of your unit aren’t necessarily covered. Those damaged items may become a source of dispute between insurance companies. For example, if structural damage was evident on the balcony, the commercial policy may cover it, but damages to your rug due to a leakage of a balcony door may be covered under your personal policy.
Tenant condo insurance covers:
- Tenant-owned contents from damages, burglary or any other losses.
- Tenant-owned contents stored in a locker on site that have been stolen or damaged.
- Premises liability: If your tenant, due to his or her own negligence, floods a unit located beneath yours, premise liability comes into play.
- Additional living expenses help your tenant to pay for alternative living accommodations if your rental condo unit becomes unlivable due to a fire, flooding or other major accidents.
Additional insurance tips for landlords
As a landlord renting out your condo unit, here are a few more useful tips:
- Talk to your insurance company: Inform your underwriter that you have moved out and that a tenant is occupying the space.
- Have a rental agreement: Clearly with your insurance company who can live in your condo. Are pets allowed? Can the renter’s girlfriend/boyfriend move in? Can your tenant sublet the condo? If you allow subletting, make sure your new tenant gets the necessary insurance.
- Tenant insurance: Your tenant should have a policy with a minimum of $500,000 to cover personal items, contents and liability. Stipulate this in your agreement.
- Know what’s in each policy: Obtain, read and understand the commercial condo corporation’s policy and your own landlord insurance policy.
- Schedule site visits: As a landlord, you have a right to schedule site visits to check on the condition of the policy. Stipulate this in your agreement.
- The Landlord Tenant Act: Be aware of the Landlord Tenant Act’s stipulations for your province, which defines the obligations of both the renter and the landlord. Ensure your renter is aware of these legalities, too.
- Wear and tear is not covered: Things get older. Counters get cuts. Floors get scuffed. Appliances get dinged. These normal wear and tear damages are not covered by insurance.
- Loss of use: This additional rider protects your financial interests should your unit become uninhabitable due to fire, flooding or other perils.
We hope that these landlord condo insurance tips will help you avoid insurance issues while renting out your condo unit.
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